Debt Yield & Maximum Loan Calculator
Enter annual property income, operating expenses, the requested loan, target debt yield, and property value. The calculator shows the current debt yield, sizes the target-yield loan, and compares the result with LTV.
Maximum loan at target yield$5,000,000.00
- Net operating income
- $400,000.00
- Debt yield on requested loan
- 8%
- Loan headroom or required reduction
- $0.00
- Target-yield status
- Exactly meets the target debt yield
- Requested-loan LTV
- 80%
- Maximum-loan LTV
- 80%
- NOI principal-recovery period
- 12.5 years
Uses annual income and expenses; monthly figures will understate NOI and supported loan proceeds.
Debt yield is one underwriting constraint and does not replace DSCR, LTV, debt-service, credit, or property-condition review.
How to use this calculator
- Enter annual effective gross income after vacancy and collection losses.
- Enter annual operating expenses before debt service, depreciation, income taxes, and capital expenditures.
- Enter the requested loan amount and the lender or scenario target debt yield.
- Enter property value to compare the requested and target-yield loans with LTV.
How debt yield sizes a loan
Debt yield is a commercial real estate underwriting ratio that compares net operating income with the loan balance. It asks how much annual property income stands behind each dollar of principal before considering the interest rate, amortization schedule, or appraised value. That makes it useful as a quick leverage test when rates or payment structures differ.
The calculator first converts effective gross income and operating expenses into net operating income:
NOI = effective gross income - operating expenses
Then it calculates the debt yield on the requested loan:
debt yield = NOI / requested loan amount
To size the largest loan that meets a target debt yield, the formula is rearranged:
maximum loan = NOI / target debt yield
The target yield must be entered as a percentage. For example, an 8% target is used as 0.08 in the formula. The loan difference is maximum loan - requested loan. A positive difference is additional headroom under the target-yield test. A negative difference is the principal reduction needed before the requested loan would meet the target.
What moves the result
NOI is the main driver. Higher income or lower operating expenses raise the maximum loan dollar for dollar through the target-yield formula. A higher target debt yield lowers the supported loan because each dollar of debt must be backed by more annual NOI. Property value does not affect the debt-yield calculation itself; it only converts the requested and maximum loan amounts into loan-to-value ratios for comparison.
If operating expenses equal or exceed effective gross income, NOI is zero or negative. In that case the requested debt yield will be zero or negative, the target-yield test will fail, and the recovery-period output is not meaningful. The property may still have value, but this simple income ratio does not support positive loan proceeds without adjustments to income, expenses, reserves, or the underwriting method.
What this calculator leaves out
This tool uses the income and expenses exactly as entered. Lenders may underwrite a different NOI by applying normalized vacancy, management fees, replacement reserves, tenant improvements, leasing commissions, capital expenditure allowances, tax adjustments, or stress assumptions. The calculator also does not model interest rate, amortization, interest-only periods, balloon maturity, closing costs, foreclosure costs, property-value changes, guarantor strength, or program-specific concentration limits.
Debt yield is usually one limit among several. A lender may approve less than the target-yield amount if DSCR, LTV, debt-service, market, collateral, borrower, or property-type rules are tighter.
Worked example
Suppose annual effective gross income is $1,000,000 and annual operating expenses are $600,000. NOI is $400,000. With a requested loan of $5,000,000, debt yield is $400,000 / $5,000,000, or 8.00%.
If the target debt yield is 8.00%, the maximum loan is $400,000 / 0.08, or $5,000,000. The loan difference is $0, so the request exactly meets the target. If property value is $6,250,000, both the requested-loan LTV and maximum-loan LTV are 80.00%. The NOI principal-recovery period is $5,000,000 / $400,000, or 12.5 years.
Common questions
What is debt yield in commercial real estate?
Debt yield is net operating income divided by the loan amount. It shows the annual NOI as a percentage of principal, before interest rate, amortization, and property value are considered.
How do lenders calculate maximum loan amount from debt yield?
They divide underwritten NOI by the required debt yield expressed as a decimal. If NOI is $400,000 and the required debt yield is 8%, the maximum loan under that test is $5,000,000.
What is considered a good debt yield?
There is no universal cutoff. Required debt yield varies by lender, property type, market, lease profile, loan program, and risk appetite, so the right target is the one used in the underwriting scenario.
How is debt yield different from DSCR and LTV?
Debt yield compares NOI with loan principal. DSCR compares NOI with annual debt service, so it depends on rate and amortization. LTV compares the loan with property value, so it depends on valuation rather than income alone.
Does NOI include mortgage payments or capital expenditures?
For this calculator, NOI excludes mortgage payments, depreciation, income taxes, and capital expenditures. Lenders may also adjust NOI for reserves, management fees, vacancy, or other underwriting assumptions.
Can debt yield be negative?
Yes. If operating expenses are higher than effective gross income, NOI is negative, so debt yield is negative. That result means the property income does not support positive principal under this simple debt-yield test.